DSG downbeat about 2008

DSG warned today that its new chief executive will face a difficult task when he finally starts work at the electrical retailer.

The company has been without a CEO since John Clare stepped down in early September. His replacement, John Browett, joins from Tesco next week after his former employer forced him to serve six months gardening leave.

DSG admitted this morning that its performance in the first half of the year had been disappointing, and also issued a downbeat assessment of its prospects for 2008. Underlying profits in the six months to the end of October slumped by 25% to £52m.

The company, which runs Dixons, PC World and Currys in the UK, blamed the drop in profits on poor sales of laptops running Vista, Microsoft's new operating system, and ongoing problems at Unieuro, its Italian retail chain.

DSG said it was confident that high-definition televisions, i-Pods, MP3 players, laptops, digital cameras, games consoles and satellite navigation equipment would be in demand this Christmas, but was more cautious about 2008.

"There is much debate about the uncertain outlook in many of our markets and the economic fundamentals make it difficult to extrapolate trends into the rest of the financial year," said the company's chairman, Sir John Collins.

"It is appropriate to be cautious about the consumer environment in 2008," he added.

DSG also warned that the white goods market, such as fridges and freezers, was "more subdued".

Freddie George, analyst at Evolution Securities, said DSG had made a "bad decision to stock up aggressively on Microsoft Vista models". Last month DSG admitted that PC World had lost £20m of profits after slashing prices to clear a stockpile of unsold Vista laptops.

Browett is seen as a deep thinker who would not shrink from introducing sweeping strategic changes. Nick Bubb, analyst at Pali International, predicted that Browett's reign would begin with DSG falling out of the FTSE 100 index at the next reshuffle, on December 12.